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Cameron LNG cargo that was on course to China now headed to Taiwan: cFlow

Highlights

No US cargoes delivered to China since March 2019

Import tariffs remain in place as virus unsettles markets

Houston — A tanker that loaded at Sempra's Cameron LNG terminal in Louisiana on March 21 and appeared to be headed to China has changed its course to Taiwan, S&P Global Platts vessel-tracking software cFlow showed Friday.

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No US LNG has been delivered to mainland China in more than a year, amid Chinese import tariffs that remain in effect despite an initial trade agreement between the two countries announced in January. The earlier course set for the SK Resolute raised hopes that the effective freeze on US LNG shipments to China would end.

China said last month it would offer tariff exemptions to certain US commodities, including LNG. But it said approvals would be based on market value and whether the purchases are economically and commercially viable, indicating imports of US commodities would continue to be subject to market restrictions. Low international prices and weaker than expected demand, exacerbated by the coronavirus pandemic, have impacted LNG flows into Northeast Asia.

In the Atlantic basin, poor netbacks to the US from both Europe and Asia could prompt cargo cancellations and potential shut-ins at US liquefaction facilities in the coming months. Since late March, US-sourced Henry Hub-linked LNG contracts, plus freight cost but excluding the take-or-pay cost, delivered to Northeast Asia have been trending around 80 cents/MMBtu above the going Platts JKM hub price, which dipped to just $2.263/MMBtu Wednesday – its lowest settlement on record.

Along the curve toward summer, a backwardated JKM curve provides little in the way of bullish sentiment over the latter parts of the second quarter. According to Platts assessment Thursday, all contracts until the end of summer are pricing under $3/MMBtu, having shown all contracts for this period over $3/MMBtu a month earlier.

LNG prices have also come under strong downward pressure from the plunge in the Brent crude market, driven by the Saudi-Russian price war as well as shrinking demand caused by the coronavirus. Long-term, Brent-based contract deals have been hit by this sudden downturn. This, in turn, could have a more sustained impact on the final investment decisions on new projects, as long-term volume commitments traditionally have been priced against Brent, though in the US offtake contracts have more commonly been tied to the Henry Hub.

The SK Resolute, meanwhile, was showing a captain's destination of Taiwan's Yung-An LNG receiving terminal, with an expected arrival date of May 1, cFlow showed. It was previously showing its destination as Tianjin, a major port city in northeastern China. It is not uncommon for LNG cargoes to change destinations while they are on the water as shippers search for the best netback.